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2022 (5) TMI 312 - AT - Insolvency and BankruptcyCancellation of lease granted earlier, after initiation of CIRP and enforcement of Moratorium under Section 14 of IBC - HELD THAT - The present is a case where effects and consequences of Section 14(1) (a) and (d) are to be considered. What is the effect of Moratorium came to be considered before the Hon ble Supreme Court in several cases. Reliance placed in the judgment of the Hon ble Supreme Court in RAJENDRA K. BHUTTA VERSUS MAHARASHTRA HOUSING AND AREA DEVELOPMENT AUTHORITY AND ANOTHER 2020 (3) TMI 34 - SUPREME COURT . In the above case, the CIRP against the Corporate Debtor was initiated on 24.07.2017. After imposition of the Moratorium under Section 14, a termination notice to the Corporate Debtor stating that upon expiry of 30 days from the date of receipt of the notice, the joint development agreement would stand terminated issued by Maharashtra Housing and Area Development Authority (MHADA). An Application was filed before the NCLT to restrain MHADA from taking over possession of the land till completion of the CIRP which was dismissed by the NCLT - The Hon ble Supreme Court in the above case held that after imposition of Moratorium there is statutory freeze limited by Section 31(3) of the Code i.e. till the period, all the things referred to under Section 14 must be strictly observed so that the Corporate Debtor may finally be put back on its feet albeit with a new management. The present is a case where CIRP was initiated on 11.03.2019 and the Notice dated 08.11.2019 terminating the lease agreement and Notice for taking possession was issued on 08.11.2019 i.e. after the imposition of Moratorium - All the institution of suits or continuation of pending suits and proceedings against the Corporate Debtor are prohibited under Section 14(1)(a) of the Code with the object that status quo regarding Corporate Debtor be maintained and further proceedings against the Corporate Debtor be not permitted during the continuance of the CIRP to preserve the Corporate Debtor from any financial assault or other proceeding to stop off its current situation for purpose of Resolution. Similarly, under Section 14(1)(d), recovery of any property by any owner or lessor which is occupied by the Corporate Debtor is prohibited. In view of the fact that Moratorium has kicked in w.e.f. 11.03.2019 due to currency of Moratorium, the Appellant could not have taken possession of the leased property by virtue of restrain under Section 14(1)(d). Further continuation or initiation of any other proceeding under Section 14(1)(a) which also prohibited the Appellant to cancel the lease during currency of the Moratorium. Although after CIRP is over, there is no fetter on the right of the Appellant to take proceeding for breach of terms of the lease by the Corporate Debtor. After CIRP is over, it shall be open for the Appellant to deal with the lease land which was leased to the Corporate Debtor in accordance with its rights as envisaged by the Lease Deed dated 20.01.2015 - In event, the plot, in question, is included in the Resolution Plan, the Resolution Applicant shall not acquire any better right to the rights which were held by the Corporate Debtor in the lease land along with liabilities attached therein. After CIRP is over, there is no fetter in the rights of the Appellant to take appropriate action in accordance with law with regard to lease land. Appeal disposed off.
Issues Involved:
1. Whether after initiation of CIRP and enforcement of ‘Moratorium’ under Section 14, the Appellant could have cancelled the lease and taken possession of the plot during CIRP. 2. Whether the Adjudicating Authority had jurisdiction to entertain MA No.3691 of 2019 praying for quashing the Notice dated 08.11.2019. 3. Relief, if any, to which the Appellant is entitled in this Appeal. Detailed Analysis: Issue 1: Whether after initiation of CIRP and enforcement of ‘Moratorium’ under Section 14, the Appellant could have cancelled the lease and taken possession of the plot during CIRP. The tribunal examined Section 14 of the Insolvency and Bankruptcy Code, 2016, which imposes a moratorium prohibiting actions such as the institution or continuation of suits against the corporate debtor, transferring or disposing of any assets, and the recovery of any property by an owner or lessor. The tribunal referred to the Supreme Court's judgment in *Rajendra K. Bhutta vs. Maharashtra Housing and Area Development Authority* which emphasized the statutory freeze during the moratorium period to preserve the corporate debtor's status quo and facilitate its resolution process. It was held that the moratorium under Section 14(1)(d) prohibits the recovery of any property by an owner or lessor if it is occupied by or in the possession of the corporate debtor. The tribunal concluded that the Appellant could not have taken possession of the leased property during the moratorium period as it would violate Section 14(1)(d). Issue 2: Whether the Adjudicating Authority had jurisdiction to entertain MA No.3691 of 2019 praying for quashing the Notice dated 08.11.2019. The tribunal discussed the jurisdiction of the Adjudicating Authority under Section 60(5) of the Insolvency and Bankruptcy Code, which allows the NCLT to adjudicate disputes related to the insolvency resolution process. The tribunal referred to the Supreme Court's judgment in *Gujarat Urja Vikas Nigam Limited vs. Amit Gupta* which held that the NCLT can adjudicate disputes arising solely on the ground of the insolvency of the corporate debtor. The tribunal also noted the judgment in *Embassy Property Developments Private Limited vs. State of Karnataka* which clarified that the NCLT does not have jurisdiction over decisions taken by the government or statutory authorities in the realm of public law. The tribunal concluded that the Adjudicating Authority had jurisdiction to entertain the application for quashing the Notice dated 08.11.2019 as it was related to the insolvency resolution process and the moratorium under Section 14. Issue 3: Relief, if any, to which the Appellant is entitled in this Appeal. The tribunal upheld the Adjudicating Authority's order quashing the Notice dated 08.11.2019 during the currency of the moratorium. It clarified that the quashing of the notice does not create any fetter on the Appellant's rights to take appropriate action for breach of the lease terms after the CIRP is over. The tribunal also addressed the Appellant's apprehension that the plot might be dealt with in the Resolution Plan and handed over to the Successful Resolution Applicant. The tribunal stated that the Resolution Applicant cannot acquire better rights than those held by the Corporate Debtor under the lease deed, and after the CIRP is over, the Appellant can take appropriate action in accordance with the lease terms. Conclusion: The tribunal disposed of the appeal with the following directions: 1. The direction issued by the Adjudicating Authority in paragraph 13 is upheld, as it was issued in reference to Section 14 of the Code. 2. After the CIRP is over, the Appellant can deal with the lease land in accordance with its rights under the Lease Deed dated 20.01.2015. 3. If the plot is included in the Resolution Plan, the Resolution Applicant shall not acquire any better rights than those held by the Corporate Debtor under the lease deed, and the Appellant can take appropriate action after the CIRP is over. The appeal was disposed of with the aforementioned directions.
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